Saia, Inc. (NASDAQ: SAIA) — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Saia provides primarily less-than-truckload (LTL) transportation services across 45 states, plus truckload, expedited and logistics services. Financial amounts below are in U.S. dollars; statement amounts are in millions unless noted.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Operating revenue | $775.1 | $729.6 | $2,130.3 | $2,136.3 |
| Operating income | $128.4 | $128.4 | $347.8 | $377.8 |
| Net income | $98.2 | $97.9 | $265.6 | $286.6 |
| Diluted EPS | $3.67 | $3.67 | $9.93 | $10.75 |
| Operating ratio | 83.4% | 82.4% | Not stated | Not stated |
- Q3 revenue rose 6.2%, while operating income was nearly unchanged and net income increased 0.3%. The operating ratio worsened by 1.0 percentage point.
- For the first nine months, revenue declined 0.3%, operating income fell 7.9%, and net income declined 7.3% year over year.
- Q3 LTL shipments increased 10.4% and tonnage rose 5.0%. Revenue per hundredweight excluding fuel surcharge increased 8.4% to $21.39; revenue per shipment excluding surcharge increased 3.0% to $290.79.
- Fuel surcharge revenue was 16.9% of revenue in both the Q3 and nine-month 2023 periods, down from 20.5% and 19.8%, respectively, a year earlier.
- Operating cash flow for the first nine months was $416.3 million, versus $344.1 million. Capital expenditures were $340.5 million; net cash used in investing activities was $337.0 million. Cash increased to $249.3 million from $187.4 million at year-end 2022.
- At September 30, working capital was $346.4 million. Total debt was $18.9 million, consisting of finance leases; there were no revolver borrowings. The company reported $267.9 million available under its $300 million revolving facility and stated it was in covenant compliance.
Material changes and management commentary
- Management attributed Q3 revenue growth chiefly to higher shipments and tonnage, including freight redistribution following an LTL competitor’s cessation of operations. Lower diesel prices reduced fuel surcharge revenue.
- Q3 operating income was pressured by higher wages, employee hours and headcount, depreciation, and claims and insurance costs. A company-wide wage increase of approximately 4.1% took effect in July 2023. Lower purchased transportation costs partly offset these increases.
- For the nine-month period, higher labor, claims and insurance, and depreciation costs contributed to lower operating income; reduced purchased transportation costs provided a partial offset.
- Saia replaced its prior credit agreement in February 2023 with an unsecured $300 million revolving facility maturing in February 2028. The facility includes an accordion option for up to $150 million, subject to conditions.
Outlook, risks and contingencies
- The company did not provide specific earnings or revenue guidance. It expected 2023 net capital expenditures to exceed $400 million, subject to ongoing evaluation of market conditions; $338.4 million had been spent through September.
- Management described the outlook as dependent on economic conditions, inflation, labor availability, fuel prices and supply-chain constraints. It cautioned that redistributed freight volumes may bring higher costs or less-profitable freight characteristics.
- Growth priorities include increasing density in current markets, pricing and yield management, targeted sales, and geographic and terminal expansion. Management said it would seek to align resources with volumes and expects productivity gains to partly offset the July wage increase.
- Disclosed risks include economic weakness, competitive pricing, labor and fuel costs, insurance and claims volatility, network expansion execution, equipment availability, technology and cybersecurity disruptions, weather, customer credit, regulation and litigation.
- Management said ordinary-course legal matters were adequately provided for and were not expected to materially adversely affect financial condition, though outcomes could materially affect results in a particular period. Claims and insurance liabilities accrued were $93.1 million.
Important facts for investors to verify
- Whether shipment growth and pricing gains can offset labor, insurance, depreciation and other cost increases, and improve the operating ratio.
- The profitability and durability of freight gained through industry volume redistribution, including changes in freight mix and operating costs.
- Execution and funding of the planned capital program, including the expected 2023 net capital expenditures above $400 million and network expansion commitments.
- Trends in fuel surcharges, labor availability and costs, claims and insurance accruals, and working capital.
- Potential outcomes of legal matters and the company’s continued compliance with credit-agreement covenants.